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Are Toll Roads Ready For VAT?

Many businesses are asking if they may claim the VAT on toll fees as input tax where they use toll roads.The answer is yes—whether they are using passenger or goods vehicles, the VAT charged is deductible as input tax.Many people don't know this, and a further problem for businesses is whether they have the necessary proof to claim the input tax.

All toll fees include VAT at 14%. If the toll fee does not exceed R50, the toll slip which states "14% VAT inclusive” will do.Where the consideration is between R50 and R3 000, an "abridged tax invoice” is acceptable.

However, those issued by SANRAL and other toll road operators usually do not comply with the requirements of Section20(5) of the VAT Act, which requires that the following must appear on the tax invoice: name,address and VAT number of supplier, the words "tax invoice”,date of issue, invoice number,details of service, the charge, and the VAT (or just the total charge,plus a statement that VAT is included at 14%).

Where the consideration is over R3 000, a "full tax invoice” is required which must, in addition to the above, show the name, address and VAT number of the purchaser of the service, i.e. the motorist. According to SARS, no guidelines have been issued to vendors, nor has any authority been given to SANRAL or any other toll operator to issue documents which do not comply with the Act.This authority can be granted by SARS in terms of Section 20(7) of the VAT Act where it is satisfied that other records suffice.

Where does this leave us? Well,the failure to issue valid tax invoices within 21 days of providing the service is punishable with a fine of R80 000 or two years in jail, preferably both, per offence.According to my calculations, some toll CEOs will spend the next 26 trillion years in jail! After all, it is a serious matter if motorists and other citizens do not respect the laws of the land.

But what about the businesses who have lost millions in input tax because they were not issued with valid tax invoices? They should contact the toll operators and demand valid tax invoices for the last five years, so that they can now claim the VAT (provided they have not already claimed it—which, without valid tax invoices, is not allowed).

If they do not get satisfactory responses, they should simply file a complaint with SARS, which, in its Service Charter, promises to treat everyone equally.SARS must then take action against the toll road operators, and in terms of Section16(2)(f) of the VAT Act, authorise the businesses to claim the input taxon the defective documents they have.

Editor’s note

The kind of action proposed by this article may seem extreme by some,and a knee-jerk reaction to the whole furore created by the Gauteng e-toll issue.However, if one considers how much is spent on tolls by a major transport contractor, the amount of potentially-lost VAT could run into significant amounts of money.And if toll road operators are charging VAT on the tolls levied, then registered venders are entitled to claim such VAT paid as an input tax, and the toll road operator is legally obliged to provide the necessary documentation required to facilitate such claim.With all the bad press that SANRAL has received over the Gauteng e-toll project, one hopes(for their sakes) that they haven’t dropped the ball on this one.

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.